Ahead of National Entrepreneurs Day on 21 August, experts are warning that the UK’s business creation rate has fallen to new lows and are calling for more to be done to support would-be entrepreneurs.
Despite recent research suggesting that more Brits than ever want to work for themselves, the actual start-up rates are falling and more needs to be done to encourage entrepreneurialism.
David Ewing, managing partner at private equity firm ECI, said: “Entrepreneurs are the ones who take the leap, build businesses from the ground up, and create the opportunities that allow investors like us to do what we love: backing brilliant companies. Sadly, last year saw a record low in new business creation, while business closures continued at pace.”
The latest figures show that:
- 2016 saw peak start-up - 414,000 new UK businesses were launched that year, representing a “birth rate” of 14.4%, one of the highest on record.
- 2022 saw the first net decline when business closures outnumbered start-ups for the first time in more than ten years.
- 2023 saw the slowest start-up rate since 2010. Only 316,000 new companies were formed, representing an 11% birth rate, the lowest annual rate in more than a decade
- 2024 saw record lows. In Q4 2024, for example, only 65,450 companies were formed, the lowest quarter on record, representing an 8.5% year-on-year fall.
In the week that the UK celebrates National Entrepreneurs Day on 21 August, David Ewing suggests a number of key ways that the UK can reignite its entrepreneurial spirit:
Access to capital. UK pension funds currently allocate just 4.4% of their assets to UK equities. Reallocating a small fraction of the UK’s £3 trillion pension assets into venture and growth funds could inject tens of billions into British start-ups. Investment incentives for later-stage businesses should also be introduced to bridge the gap between start-ups and scale-ups.
Skills and talent. Entrepreneurship should be part of the school curriculum to shift perceptions, making entrepreneurship feel both positive and accessible. It would also teach valuable skills such as teamwork, problem-solving, resilience and financial literacy.
Untapped potential. Targeted support programmes for female and minority entrepreneurs could help unlock potential. Women currently account for just 18% of new company founders in the UK.
Support innovation. Universities could benefit from fostering industry and start-up ecosystems similar to Cambridge’s Silicon Fen, where close collaboration between academia and enterprise drives innovation.
Tax and red tape. Current fiscal trends suggest that tax contributions are more likely to rise than fall. For instance, recent changes to Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) have resulted in higher tax rates. Introducing a “rollover relief” could allow an entrepreneur who sells one venture to reinvest the proceeds into a new start-up without an immediate tax hit.
David Ewing also points out that the celebration of entrepreneurial success in the UK often feels “muted and cautious” compared to the US. He concludes: “If we want more people to start businesses, we must collectively work to provide the inspiration and visibility that makes them believe they can.”
Written by Rachel Miller.